It may be easier to do business within the country but is there any transaction happening at all?
Under the stewardship of Prime Minister Narendra Modi, India has seen a marked increase in the World Bank’s “Ease of Doing Business” ratings. From being outside the top 100, the country now ranks 63rd, making a 14-point leap from last year. For the third consecutive year, India also figured in the top 10 most improved nations in the world. In fact, the Prime Minister has made India’s improvement on this front a matter of personal pride. And while there might be several questions about the methodology of the survey — it only measures parameters from India’s two largest cities of Delhi and Mumbai, which are better run and managed than most others — it is an indicator that establishing and running a business in India has become far easier than ever before. And that fear and doubts are ebbing away, one of the key reasons for improvement being the successful implementation of the Insolvency and Bankruptcy Code. The problem is that through a combination of a lack of consumer demand and regressive tax terrorism, business itself is suffering and that is showing in a rapidly slowing economy. With more cases of Non-Performing Assets (NPAs), particularly in real-estate, popping up at the rate of one every week, it appears that things might get a lot worse before they get better even if India’s ranking in “Ease of Doing Business” is improving.
Several problems faced by crucial sectors, like real estate, today are leftovers from the politically connected profligacy during the UPA regime. There is little doubt about this. The Wadhawan brothers of HDIL and DHFL groups made hay a decade ago, thanks to their political patrons, even as other real estate developers, big and small, felt the heat. Loans were forwarded to fugitive businessmen like Nirav Modi and Vijay Mallya not during Modi’s tenure but earlier. Modi though has not been firm enough in prosecuting some of these economic offenders. While much is being done to repair the public sector banks, the fact is they are not lending money anymore and credit offtake has hit multi-year lows. That is evident not just in the collapse of the real estate sector but also other indicators such as the flattening curve of car sales. It is probably time for the Prime Minister to bring in some outside economic analysts into the Government. There needs to be a revival of animal spirits in the economy and growth has to come back. Simply making business easier will not help anyone because there is no business left to be done. At the same time, while doing business is easier in Delhi and Mumbai, one forgets that both these cities have steady electricity and water and a fairly upgraded infrastructure. Many of India’s other cities, including the satellites of the national capital and Mumbai, are chaotic. While some like Ahmedabad and Hyderabad are relatively well-managed, others, particularly in States which need to attract investment such as Uttar Pradesh, are a morass of bureaucratic ineptitude. In fact, one can safely argue that improvements in the bigger cities are widening the gulf between them and the rest of the country. And despite great strides, India still remains far away from its competitors like China, which ranks 31st on the same index.